ABAYA vs.

EBDANE

Facts:

The Government of Japan and the Government of the Philippines, through

their respective representatives, namely, Mr. Yoshihisa Ara, Ambassador
Extraordinary and Plenipotentiary of Japan to the Republic of the
Philippines, and then Secretary of Foreign Affairs Domingo L. Siazon, have
reached an understanding concerning Japanese loans to be extended to the
Philippines. These loans were aimed at promoting our country’s economic
stabilization and development efforts.

The assailed resolution recommended the award to private respondent China

Road & Bridge Corporation of the contract for the implementation of civil
works for Contract Package No. I (CP I), which consists of the
improvement/rehabilitation of the San Andres (Codon)-Virac-Jct. Bago-Viga
road, with the length of 79.818 kilometers, in the island province of
Catanduanes.The DPWH caused the publication of the “Invitation to
Prequalify and to Bid” for the implementation of the CP I project, in two
leading national newspapers, namely, the Manila Times and Manila Standard
on November 22 and 29, and December 5, 2002.

A total of twenty-three (23) foreign and local contractors responded to the

invitation by submitting their accomplished prequalification documents on
January 23, 2003. In accordance with the established prequalification
criteria, eight contractors were evaluated or considered eligible to bid as
concurred by the JBIC. Prior to the opening of the respective bid proposals,
it was announced that the Approved Budget for the Contract (ABC) was in
the amount of P738,710,563.67.

The bid goes to private respondent China Road & Bridge Corporation was
corrected from the original P993,183,904.98 (with variance of 34.45% from
the ABC) to P952,564,821.71 (with variance of 28.95% from the ABC) based
on their letter clarification dated April 21, 2004.
The petitioners anchor the instant petition on the contention that the award
of the contract to private respondent China Road & Bridge Corporation
violates RA 9184, particularly Section 31 thereof which reads:

SEC. 31. Ceiling for Bid Prices. – The ABC shall be the upper limit or ceiling
for the Bid prices. Bid prices that exceed this ceiling shall be disqualified
outright from further participating in the bidding. There shall be no lower
limit to the amount of the award.

The petitioners insist that Loan Agreement is neither an international nor an

executive agreement that would bar the application of RA 9184. They point
out that to be considered a treaty, an international or an executive
agreement, the parties must be two sovereigns or States whereas in the case
of Loan Agreement No. PH-P204, the parties are the Philippine Government
and the JBIC, a banking agency of Japan, which has a separate juridical
personality from the Japanese Government.

The respondents however contend that foreign loan agreements, including

Loan Agreement No. PH-P204, as executive agreements and, as such, should
be observed pursuant to the fundamental principle in international law of
pacta sunt servanda. The Constitution, the public respondents emphasize,
recognizes the enforceability of executive agreements in the same way that
it recognizes generally accepted principles of international law as forming
part of the law of the land.34 This recognition allegedly buttresses the
binding effect of executive agreements to which the Philippine Government
is a signatory. It is pointed out by the public respondents that executive
agreements are essentially contracts governing the rights and obligations of
the parties. A contract, being the law between the parties, must be
faithfully adhered to by them. Guided by the fundamental rule of pacta sunt
servanda, the Philippine Government bound itself to perform in good faith
its duties and obligations under Loan Agreement.

Issue :

Whether or not the the loan agreement violates RA 9184.

Ruling:

The court ruled in favor of the respondents.

Significantly, an exchange of notes is considered a form of an executive

agreement, which becomes binding through executive action without the
need of a vote by the Senate or Congress. executive agreements, They
sometimes take the form of exchange of notes and at other times that of
more formal documents denominated “agreements” or “protocols”.

The fundamental principle of international law of pacta sunt servanda,

which is, in fact, embodied in Section 4 of RA 9184 as it provides that “[a]ny
treaty or international or executive agreement affecting the subject matter
of this Act to which the Philippine government is a signatory shall be
observed,” the DPWH, as the executing agency of the projects financed by
Loan Agreement No. PH-P204, rightfully awarded the contract for the
implementation of civil works for the CP I project to private respondent
China Road & Bridge Corporation.